"Old-fashioned" mortgage rules hindering first-time buyers

New research has found that the barriers first-time buyers are facing in the UK aren't just limited to the size of the deposit that they need.

GBG has found that “old-fashioned” mortgage application processes are also hindering people trying to get onto the property ladder. The requirement for paper-based proofs of ID and address to be provided are putting many first-time buyers off purchasing a home, especially considering that most people now conduct all their business online.

Paperless banking leads to problems when trying to get a mortgage

Under the latest mortgage rules, individuals applying for a mortgage have to provide proof of ID and address in the form of original documents and not printed online copies.

Research from GBG has found that this requirement is creating a barrier to many first-time buyers, most of who now use online services rather than receive paper-based statements.

GBG found that 69% of UK consumers now receive paperless bank statements wile almost half (46%) receive online credit card statements. Young people are more likely to opt for a paperless approach to banking, with three in four 18- to 24-year-olds saying that they receive digital bank statements.

The research also found that two in five (42%) of UK consumers do not have paper copies of utility bills for their current address. A third of consumers receive paperless utility bill statements – either by email or online. All this means that consumers are finding it hard to provide proof of their address when lenders don't accept copies of online statements.

Nick Brown, group managing director at GBG, says: “As incidents of fraud continue to rise, the pressure for banks and lenders to prove someone’s identity has never been more critical. These paper-first procedures had to be put in place to sort the ‘good’ from the ‘bad’. However, it’s clear these old-fashioned measures haven’t caught up with what’s actually happening in the real world.

"And, as more customers opt to receive paperless statements and access their documents online, these traditional processes could hinder a legitimate individual’s chance of getting on the property ladder.

“In this digital age, processes should be becoming simpler rather than more complex. Today, we can verify the identity of over four billion people in the world in a matter of seconds, so why should people have to face weeks or months of form frustrations to try and get the service they require?"

The research found that the problem is not just limited to mortgage applicants needing to prove their current address. Lenders will often ask borrowers to prove their residency at previous properties if they have moved within the last few years.

45% of UK consumers have moved once or twice in the last three years and over a third (34%) do not hold proof of address – such as bank statements or bills – for their previous addresses.

A third of borrowers find the mortgage process 'stressful'

GBG also found that a significant number of homeowners found their mortgage application “stressful”. 36% agreed with this statement while a third said that it was a complicated process. The research also found that it takes the average UK homeowner over three hours to source all the paper documents they need for their mortgage application.

“As the world continues to digitise, banks and lenders need to bring on-boarding processes into the 21st century and keep up with consumers’ expectations,” adds Brown.

“The digital age creates the need to allow legitimate customers to on-board with ease and speed, whilst stopping fraudsters. Using identity data intelligently allows businesses to make better decisions quicker, and ultimately make processes slicker and more accurate.”